The Nation; $53 Million For Pedro? How Do You Figure?

By ANDREW ZIMBALIST; Andrew Zimbalist is a professor of economics at Smith College.

Published: December 19, 2004

LAST week, the New York Mets agreed to pay Pedro Mart?z between $53 million and $56 million to pitch for the next four years, leaving fans to wonder what management was thinking. Could the former Red Sox star, now 33 and apparently past his physical prime, really be worth that kind of money?

Let's do the math. Say that he stays healthy and pitches well -- an optimistic but not unreasonable assumption. Say he starts 16 home games, and the Mets draw an average of 15,000 more fans at those games than their typical crowd last season -- 43,979 instead of 28,979. Figuring $25 a ticket and another $8 a head for the team's share of food and souvenir sales, parking and so on, Mr. Mart?z 's direct impact on stadium revenue would be to add $7.92 million for the season. If the bump in attendance turns out to be just 10,000 fans at his games, then the impact would be a more modest $5.28 million.

But that's not all. More people at the ballpark means the team earns more money from stadium signs and sponsorships. And Mr. Mart?z's presence would presumably lift the Mets in the standings and persuade fans that the team's owner, Fred Wilpon, is serious about winning, so attendance ought to rise at other games as well.

Stay optimistic and assume that the new general manager, Omar Minaya, isn't done yet: He signs another superstar or two (think Carlos Delgado), the 2005 team contends for the division title, and the crowds at Shea Stadium grow to rival the 2004 New York Yankees' average attendance of 47,788 -- a gain of about 18,800 a game. That brings us to $50.3 million in extra annual revenue. If we can attribute, say, one-third of this to Mr. Mart?z, his incremental contribution would be $16.8 million a year.

Did we crack the nut? Not quite. Major League Baseball has revenue-sharing rules that reroute some money from big-market teams to small; in the Mets' case, about 40 percent of the team's incremental revenue. That cuts Mr. Mart?z's contribution down to just $10.1 million a year, well below his average salary of $13.5 million.

So, a bad deal, right? Not necessarily. We've left out television. Signing Mr. Mart?z will not change the fee Cablevision is obliged to pay to televise Mets games next year, but his presence could affect the success of the Mets' new regional sports channel venture with Time Warner and Comcast.

Across town, the Yankees have their own cable network, known as YES, begun in the middle of the team's protracted string of World Series appearances. The Yankees were hot, so the network was hot: in 2001, it was reckoned to be worth around $900 million, more than the team itself.

The regional sports cable market is flooded in New York, with YES, MSG and Fox Sports New York already operating, and there is no guarantee that the Mets' new network will be successful. But a compelling product on the field would be a big help. If Mr. Mart?z can win a lot of games and infuse the team with attitude and charisma, the network could pull in $250 million in annual revenue (most of which can be sheltered from revenue sharing), and it, too, could be more valuable than the team.

Nothing is certain in economics or sports, but some gambles are better than others. With the new network in the offing, this looks like a smart time for Mr. Wilpon to open his wallet for a marquee player like Pedro Mart?z.

And if it doesn't work out as well as the Mets hope, Mr. Minaya can console himself with the thought that the Yankees will be paying Kevin Brown $16 million next year.